Ex-FTX CEO Sam Bankman-Fried Indicted

New York –

On Tuesday, the U.S. government charged Sam Bankman-Fried, the founder and former CEO of cryptocurrency exchange FTX, with a string of financial crimes, accusing him of knowingly defrauding customers and investors to enrich himself and others while making billions of dollars at the firm. central role in the collapse of the US dollar.

The 13-page indictment alleges that beginning in 2019, Bankman-Fried devised a “plan and technique” to “defraud” FTX clients and investors of their funds into his crypto hedge fund, Alameda Research. Pay bills and debts, and splurge on real estate purchases and big political donations.

Bankman-Fried was arrested by Bahamian authorities on Monday at the request of the U.S. government, which charged him with eight criminal offenses ranging from wire fraud to money laundering to conspiracy to commit fraud. He was also accused of making illegal campaign contributions, a notable allegation because Bankman-Fried is one of the largest political donors this year.

The indictment is on top of civil charges the SEC announced earlier Tuesday. The SEC charged Bankman-Fried with defrauding investors and illegally using their money to purchase real estate on behalf of himself and his family.

The charges could carry a maximum prison time of 115 years, said U.S. Attorney spokesman Nicholas Biase.

U.S. authorities will also seek to recover any financial gains Bankman-Fried received from the alleged scheme. They are expected to request his extradition to the United States, although the timing of that request is unclear.

Bankman-Fried’s attorney, Mark S. Cohen, said Tuesday that he “is reviewing these allegations with his legal team and considering all of his legal options.”

FTX filed for bankruptcy on Nov. 11, when it ran out of funds after what became the cryptocurrency equivalent of a bank run.

Before his arrest, Bankman-Fried had been holed up in his luxurious Bahamian compound in Nassau since the collapse of FTX. He is expected to appear in a Bahamian court on Tuesday. The United States has not yet made an extradition request to the Bahamas, but is expected to do so.

Bankman-Fried is one of the richest men in the world; at one point, his net worth hit $26.5 billion, according to Forbes. He is a well-known figure in Washington, donating millions of dollars to mostly left-leaning political causes and Democratic political campaigns, though he also donates to Republicans. FTX grew to become the second largest cryptocurrency exchange in the world.

That all unraveled quickly last month when reports emerged questioning the strength of FTX’s balance sheet. When clients sought to withdraw billions of dollars, FTX could not meet all requests, as it had apparently used client deposits to fund investments in Alameda Research, Bankman-Fried’s trading arm.

“We allege that Sam Bankman-Fried built a house of cards based on deceit while telling investors it was one of the safest structures in cryptocurrency,” said SEC Chairman Gary Gensler.

The SEC complaint alleges that Bankman-Fried raised more than $1.8 billion from investors since May 2019 by promoting FTX as a safe and responsible platform for trading crypto assets.

Instead, the complaint alleges, Bankman-Fried transferred clients’ funds to Alameda Research without informing them.

“He then used the Alameda as his personal piggy bank for the purchase of luxury condominiums, support of political campaigns, private investments, and other purposes,” the complaint reads. “None of this was disclosed to FTX equity investors or trading clients of the platform.”

The SEC said Alameda did not separate FTX investor funds from Alameda Investments, using the funds to “indiscriminately fund its trading operations,” as well as Bankman-Fried’s other ventures.

The day before Bankman-Fried’s arrest, he was due to testify before the House Financial Services Committee. The committee chair, Rep. Maxine Waters, D-Calif., said she was “disappointed” that Bankman-Fried’s sworn testimony was not available to the American public and FTX’s clients.

However, the hearing continued, with FTX’s new CEO, John Ray III, testifying.

Wray told Congress that FTX’s debacle was the result of months, if not years, of poor decision-making and poor financial control.

“This didn’t happen overnight or in a week,” he said.

Bankman-Fried recently said he did not “intentionally” misuse clients’ funds, and he believes angry clients will eventually get their money back. Bankman-Fried also stated that he believes FTX was a victim of a sudden market crash and customer deposits were safe before then.

The SEC challenged Bankman-Fried’s assertion in its complaint Tuesday.

“FTX operates under the veil of legality,” said Gurbir Grewal, director of the SEC’s Division of Enforcement. “But as we allege in our complaint, the camouflage was not just thin, it was fraudulent.”

The collapse of FTX — following the collapse of other cryptocurrencies earlier this year — added to the urgency to regulate the industry.

Yesha Yadav, a law professor at Vanderbilt University who specializes in financial and securities regulation, said U.S. lawmakers and regulators were moving too slowly, but that could change.

“With so many people losing money, there is clearly pressure on lawmakers to act,” she said.


Associated Press Writer Fatima Hussein in Washington contributed to this report.

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